Belloc on Banking

In Belloc’s christian Europe, the late Stuart kings, the two Charleses, James II and then the long Jacobite resistance, along with the achievement of Louis XIV, represented the heroic but utterly doomed struggle against the Bankers. I was soon to discover that the achievement of the Osmanli Khalifs was, on the other hand, a triumphant curbing of the Money-power, since usury itself, alongside denial of the Unity of God, represented the two great abominable crimes, and protection from them granted the monarch’s people a glorious civilisation that lasted until the Bankers broke into the Khalifate, offering the new technology but on condition that usury could be insinuated into the transaction. I find it essential to include a chapter of one of Belloc’s key works, ‘Monarchy’, his brilliant reading of the Sun King’s reign as being an archetypal demonstration of personal rule as the only instrument that can defeat the Money-power. What prompts me to include this is my awareness that this radically liberating philosophy is not only utterly unknown by the present generation, but is also unimaginable to it. It is shocking that the young of today think they are radical in asking the banks to reduce, if only a little, the crippling debt that continues to kill millions. Rock-stars are allowed to present themselves to the public as at the limits of legitimate radicalism when they beg for debt-reduction or even a return to zero debt, on the understanding that this will revive the dying patient enough to become indebted anew. Thanks to the stunning success of the media re-writing history and actually selling to the people the idea that the super-banks are there to help the poor and rescue them from corrupt government, no-one is allowed to approach the motor-factor that it is interest itself, usury, that is the crime of the century. Here is Belloc’s chapter on banking.

‘It is as well, at this point, to make quite clear the political menace (and advantage) of the new banking whereof Amsterdam was the pioneer in modern times.

I have called it in general “the Money-power,” and it is true that in general the eternal duel between Monarchy and Money-power includes the special form of Money-power called Modern Banking, and lest a point not often defined should be misunderstood I will proceed to define it.

The power of a banking system lies in three things: first that it is able to create currency uncontrolled by the State, and in amounts not limited save by the bankers’ own interest and convenience. It makes money “out of air” as it were.

Secondly, this “money” is not real wealth as is land or crops or cattle, and can therefore be transferred, expanded or concealed without offering any hold to the sovereign Authority which should properly govern all society. In other words a banking system is a state within the State.

Thirdly, the bank-currency thus created out of nothing is what is called “liquid”. The whole of it can be used for whatever purposes the bank proposes. It comes to check industry at will, to bribe or subsidise whom it will or to penalise whom it will, to control as a money-lender the activities of the community and to drain the wealth of that community by the usury it demands.

Since the whole of this power depends upon the capacity of a banking monopoly for creating currency let us understand the trick by which it acquires this essential facility.

In the beginning a man having coin which he desired to secure from danger would leave it with a goldsmith or anyone who had a strong box and a counter for paying in and out. He left it, of course, under the condition that he might withdraw the whole of it or any part of it whenever he chose. Suppose eleven men thus leave each of them one hundred gold pieces with the man who has the strong box; he is henceforward their banker. They come to him from time to time, with-drawing each of them some portion of their money to use, or paying in some new money to be kept for them.

It was soon found that in practice the amount with-drawn at any given unit of time, say a month, would be replaced by depositors at a certain average pace: that is, while there was a certain volume or pace of with-drawal there was also a corresponding pace of deposits. But between inflow and outflow there was always a certain large reserve on hand: there was always a certain large sum in gold and silver which the man who held the coins in trust had by him.

In practice it was found that this permanently unused balance came to about ten times the amount required to be kept ready for meeting withdrawal demands.

The eleven men having left in trust, on the honour of the banker £1,100, a whole thousand of that eleven hundred regularly lay idle at any given time. It was enough for the banker to keep one hundred by him to meet current demands for withdrawal, for he found he could count upon new deposits coming in as freely as withdrawals were made. Jones would draw ten pounds out of his hundred to pay a bill on New Year’s Day, but at Candlemas, a month later, he would pay in ten pounds which he had received and wanted to be kept safe. One-tenth of the total amount, then, was all that the banker had to keep by him to meet is obligations. He proceeded to embezzle the rest—at least, it is embezzlement when a private individual uses for his own purpose money deposited with him on trust. But custom ultimately winked at this embezzlement, so, at last, the banker felt quite secure if he had really only got one-tenth of the money which, in law and morals, he was bound to pay on demand. The other nine-tenths he could do what he liked with— and especially lend it out at usury.

But that is only the beginning of the story. It was again soon found that a banker’s promise to pay would be accepted by his clients as though it were actual payment. His bit of paper would circulate from hand to hand in the sure and certain hope that when it was presented it would be cashed. So these bits of paper became currency. The banker had created money out of nothing, greatly to his advantage, as it would be to the advantage of any of us who should be lucky enough to bring off the same trick. You and I with eleven hundred pounds can pay eleven men to build a house for us in six months. But a banker with eleven hundred pounds can built ten houses where we build one. You and I can lend our eleven hundred out at five per cent and get fifty pounds a year; but a banker can get five hundred and fifty a year on the same basis.

But that was not the end of the story. There was a further development. The bank allowed a customer to draw out as much of this currency as it thought safe over and above the sum of money which he was registered as having deposited with him. It gave John Jones an instrument of credit—at usury, of course—and then another of the same sort to those who did business with John Jones. Thus a farmer with a thousand pounds’ worth of stock who wanted a thousand pounds’ worth of timber, but had no ready money, and the man with a thousand pounds’ worth of timber who wanted a thousand pounds’ worth of stock, but had no ready money, could not do a deal unless they knew each other and were in touch. They needed currency to effect the exchange. Before the trick of banking arose they would each have had to pay in coin, each receiving a thousand gold pieces and each paying out a thousand gold pieces. With banking, exchange took place unhampered by such clumsy methods. Banking therefore vastly increased facilities of exchange, that is, of trade. But the new advantage was gained at the cost of two things: (1) Interest by the timber man and the sheep owner on the security of their own wealth had to be paid on the sham currency.* (2) A trader could not get hold of that sham currency save by leave of the banks.

When a great central bank was established, such as that of Amsterdam, and its credit firmly rooted, it could, up to a certain limit, create currency at will. It could also get into its power all those over whom its credit system extended. It could, moreover, subsidise governments, make possible vast expenditure otherwise not possible, and by withholding or extending its credit, could decide the main issues of society.

When such an institution as the Bank of Amsterdam had arisen, it was stronger than any king, or government of any kind. It conferred great benefits on the community wherein it stood, permitting a rapid expansion of all economic activity and especially of foreign trade. It could foster domestic manufacture and stimulate every other material function of society. It paid for wars in a fashion that kings could not do and repaid itself by creating what we call today a national debt, that is, by levying usury through the government’s power of taxation. After the Dutch invasion of England in 1688 the way to national indebtedness was clear and the Bank of England, under the new system of bank credit, brought the same benefits and the same evils to England, as Holland had enjoyed. London and Amsterdam acquired a strength which the national monarchs had not possessed. They became the masters of their own community and in part the masters of others. The old traditional social morals of Europe were faced by a growing and vigorous force of usury.

By all this we may see why the great typical monarchy of France was at issue with the Money-power, why the Money-power everywhere worked to destroy monarchy—that which alone could control it.’

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